Navigating Military Finances

Our military service members are a fine group of men and women, sacrificing for our nation and living a lifestyle that’s unique and challenging. Although they don’t do it for the thanks, I’m glad we have Veterans Day set aside to show them our gratitude that we celebrated last weekend. As a military mom it’s heartwarming to see so many businesses offering discounts or free meals on Veterans Day.

Living on military pay can be a challenge, too, but there are perks and resources to help. The details of the familiar GI Bill and VA loan program are too much to cover in this writing, so I’ll focus on some of the lesser known programs. As always, this is general information; check the finer program points before making any decisions.

Financial incentives and protections

One of the attractions of a military career is retirement after 20 years of service, which for someone who joins at 18, can mean pension income as young as age of 38, with cost of living increases to boot. But even if you don’t make it a career, the voluntary military retirement plan, the Thrift Savings Plan, is a terrific retirement savings vehicle. The Thrift Savings Plan works like a 401(k), except for military members there is no matching contribution. The contribution limits are the same as a 401(k) ($17,500 in 2013 plus a $5,500 catch-up contribution for those 50 and over).

However, while serving in a combat zone, the limit is increased to $49,000. Investment expense charges in the TSP are incredibly low; typically a tenth of those of low-expense leader Vanguard. The fund choices are solid and uncomplicated, too. A Roth plan was recently introduced, which for a service member in a low income tax bracket can be a home run.

Sometimes convincing a young person to enroll in the TSP is an uphill battle, because he doesn’t like the idea of limiting access to his money until retirement or doesn’t want to go without it now. However, for those headed to a combat zone, have we got a deal for you.

The Savings Deposit Program is a savings plan, not a retirement plan, and you can put in up to $10,000 of unallotted pay and earn 10 percent annualized interest on the money, compounded quarterly. Yes, I said 10 percent. Those receiving Hostile Fire/Imminent Duty pay can begin contributing on the 31st consecutive day in the designated area, and can be discontinued at any time. The money will continue earning interest for up to 90 days after returning, and you can withdraw your funds once you are no longer in the combat zone. This is a fantastic reward for their dangerous work; one you’re not likely to find anywhere else.

The Servicemembers Civil Relief Act is designed to give relief from certain legal obligations, including an interest rate cap of six percent on most debt incurred prior to becoming active duty. Federal student loans are one exception, but for most loans interest in excess of six percent is forgiven. You are also entitled to relief from certain legal action such as pending trials and some evictions, and permits you to terminate a lease in the event of a permanent change of station, mobilization or temporary duty. There are specific guidelines to follow to be eligible for these protections, so check with military legal assistance prior to taking action.

Some states waive or delay registration or driver’s license renewals. In Pennsylvania, if you are active duty, you do not have to renew your driver’s license while you serve, and have 45 days after discharge to renew. This also applies to any family members in your household. You do need to renew the registration of any car still registered in Pennsylvania, but inspections are waived until 10 days after you return.

In New Jersey, you may delay renewing both your license and registration until two weeks after you return; however you will need to pay the fees at that time. New Jersey also requires you carry an Extension Letter (available on N.J. DMV’s site) with your license, registration, and military ID to prove eligibility. This only applies to you as the service member; if a family member wishes to drive your car, he or she must also carry proof of dependency in addition to the other documents.

Tax incentives

Military pay in itself can be rather low, but the addition of some allowances helps. For those eligible to live off base, basic allowance for housing and basic allowance for sustenance are helpful. Both of those allowances are tax free, which of course makes the real value higher than regular taxed pay. For Pennsylvania resident service members, active duty pay received while stationed outside of Pennsylvania is tax free. You must send in copy of your orders with your tax return to claim the exemption. The same applies to the local tax. Combat pay is also exempt from federal income tax (but not Social Security and Medicare).

Military members serving overseas are entitled to an automatic two-month tax extension, and exemption from penalties. For those in a combat zone, the extension is more generous. It is equal to the number of days served in the combat zone prior to the tax deadline, plus amount of any time spent continually hospitalized from combat injuries up to five years, plus 180 days. So if you deploy to a combat zone on March 15 for example, you are entitled to an extension of the 31 days between March 15 and April 15, plus 180 days, for a total of 211 days. You are also free from penalties and interest during this time.


If you need advice on those taxes, Military OneSource offers free tax counseling, as well as a free version of HR Block’s tax program. They also offer up to 12 free financial counseling sessions. There is a wealth of information on their website ( on various topics like relationships, mental health, and deployment. Eligible family members, including parents, can set up a login as well, and again, many of the services offered to service members are also available to families.

Each branch of service has an agency designated to help struggling service members; the Army Emergency Relief, Navy Marine Corps Relief Society and the Air Force Aid Society. The Military Spouse Employment Partnership exists to provide support and job opportunities to military spouses, and the Employer Support for Guard and Reserve is there to help deal with employer issues that may arise from Guard and Reserve service. The military is making it a priority to support families and service members with the unique issues that come from the extended time we have been at war; I encourage you to take advantage of the services they offer.

photo by: daemonv

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Part 2A & B of Form ADV: Firm Brochure